UK Shop Prices Ease in January, Offering Respite from Inflation

Prices in British shops rose at the slowest annual pace since May 2022 this month, according to the British Retail Consortium (BRC). Shop price inflation dropped to 2.9% in January from 4.3% in December, driven by heavier discounting of goods in January sales this year. Non-food prices were up 1.3%, the least since February 2022, while food prices rose 6.1% on the year, the smallest increase since June 2022. Lower wholesale costs allowed supermarkets to cut the price of some goods. However, consumer demand remains fragile, with most households yet to feel better off after nearly two years of inflation, said Mike Watkins, head of retailer and business insight at NielsenIQ. The Bank of England (BoE) is expected to lower its near-term inflation forecasts when it announces its next interest rate decision on Thursday. However, with inflation still double the BoE’s target, the central bank is likely to indicate it remains some way from considering cutting interest rates from their current nearly 16-year high of 5.25%.